Hitting the Books: Handling Finances When Students Divorce

Hitting the Books: Handling Finances When Students Divorce

Jordan and Hailey met and married while both were freshmen at Sacramento State. Unfortunately, the marriage ended after two years. Both were still in college. As their divorce progressed, they ran into some issues regarding their student loans. They learned that debt is handled differently when students divorce or when student loans are involved in a divorce.

Splitting Debt in a Divorce

Typically, most debt incurred during a marriage is community debt that is split between the spouses. There are exceptions, and other factors to consider, but this is the general rule of thumb.

For example, Jordan uses the couple’s credit card more than Hailey does. When they divorce, however, it is possible that Hailey will be forced to pay half of Jordan’s credit card debt.

But that’s credit card debt. What about debt related to education?

Student Loans in a Divorce

Debt incurred for education or training is handled differently that other debt. Student debt acquired before or during a marriage is the separate debt of the spouse that incurred it.

Our star-crossed couple, Jordan and Hailey, both took out student loans. Some of the loans were taken out before the marriage and some during the marriage. Jordan most likely will pay his loans only. The same is true for Hailey.

Even so, there may be exceptions to the ‘student-debt-is-separate-debt’ issue when it affects the community estate.

Community Reimbursement

According to California law, community contributions for one spouse’s education or training may be reimbursed if the training enhanced his or her earning capacity. The same may hold true for repayment of loans for education or training.

However, reimbursement may be limited or eliminated if:

  • The community benefited from the party’s education, training, or student loan.
  • Both parties received community contributions for education, training, or student loans.
  • Education paid for with community funds reduces that party’s need for support.

The parties may agree to different settlement amount.

Learn More About Student Loans and Divorce

The attorneys at the Law Offices of Judy L. Burger are experienced at all phases of divorce proceedings. Call us at 415-293-8314 to schedule a private appointment or visit our website. We maintain offices in San Francisco, Marin County, Santa Barbara, Ventura/Oxnard, San Jose, Gold River (Sacramento), and surrounding communities. Also, we are opening a Beverly Hills office soon.

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